The Veblen-Gerschenkron Effect of FDI in Mezzogiorno and East Germany

Centro Studi Luca d'Agliano Development Studies Working Paper No. 164, UC Davis Dept. of Economics Working Paper No. 03-01

49 Pages Posted: 20 Feb 2003

See all articles by Dieter M. Urban

Dieter M. Urban

Johannes Gutenberg University of Mainz - Institute for International Economic Theory; CESifo (Center for Economic Studies and Ifo Institute)

Giovanni Peri

University of California, Davis - Department of Economics

Date Written: January 2003

Abstract

The presence of foreign multinational enterprises (MNEs) can benefit local economies. In particular, if MNEs are very productive compared to domestic firms, they may promote learning and catch-up of local firms. Such a channel of spillovers from MNEs to local firms is known as the Veblen-Geschenkron effect. Rather than the overall density of MNEs in a region or sector, it is their initial productivity advantage on the local firm to determine the positive effect on domestic productivity growth. We test this hypothesis using firm level data for German and Italian companies during the 90's and we find evidence of a significant and robust Veblen-Gerschenkron effect.

Keywords: Veblen-Gerschenkron, FDI, Spillovers, Productivity

JEL Classification: F23, O47, R11

Suggested Citation

Urban, Dieter M. and Peri, Giovanni, The Veblen-Gerschenkron Effect of FDI in Mezzogiorno and East Germany (January 2003). Centro Studi Luca d'Agliano Development Studies Working Paper No. 164, UC Davis Dept. of Economics Working Paper No. 03-01. Available at SSRN: https://ssrn.com/abstract=346841 or http://dx.doi.org/10.2139/ssrn.346841

Dieter M. Urban

Johannes Gutenberg University of Mainz - Institute for International Economic Theory ( email )

D 55099 Mainz
Germany

CESifo (Center for Economic Studies and Ifo Institute)

Poschinger Str. 5
Munich, DE-81679
Germany

Giovanni Peri (Contact Author)

University of California, Davis - Department of Economics ( email )

One Shields Drive
Davis, CA 95616-8578
United States
530-752-3033 (Phone)
530-752-9382 (Fax)

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